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Lufthansa’s Revised Offer for ITA Airways Stake Faces EU Hurdles

 |  April 16, 2024

Lufthansa’s persistent efforts to secure EU antitrust approval for its 325-million-euro ($346 million) acquisition of a 41% stake in Italy’s state-owned ITA Airways, the successor to Alitalia, face significant challenges, according to sources familiar with the matter.

The latest package of remedies submitted by Lufthansa to the European Commission last Thursday reportedly bears resemblance to an earlier proposal that failed to meet the Commission’s requirements. While details of the revised offer remain undisclosed, it is said to include concessions such as ceding airport slots, traffic rights, and aircraft to a competitor, echoing elements of the initial proposal.

However, insiders caution that these adjustments may not be sufficient to assuage the concerns of EU regulators, particularly regarding competition on short-haul and long-haul routes. The Commission has emphasized the need to address competition concerns on routes between Italy and Central European countries, as well as those connecting Italy with the United States, Canada and Japan. Additionally, the market dominance of ITA Airways at Milan’s primary airport is a focal point of scrutiny.

Related: Lufthansa Faces EU Antitrust Warning Over ITA Airways Stake Bid

Reuters reports that failure to adequately address these concerns could jeopardize the deal and lead to an EU veto. The European Commission has been stringent in its assessment, particularly regarding competition dynamics in the airline sector.

One notable aspect of the Commission’s scrutiny is its exclusion of Ryanair as a direct competitor to Lufthansa in Italy, despite Ryanair’s substantial market share exceeding 40%. The regulatory body distinguishes between the customer bases and operational strategies of the two airlines, per sources.

Another point of contention lies in the Commission’s definition of long-haul routes, with Lufthansa challenging the exclusion of connecting flights from Italy via rival carriers’ hubs. While the regulator focuses solely on direct flights, Lufthansa argues for a broader consideration that encompasses connecting flights, potentially impacting routes like Rome to New York.

Source: Reuters